Question 1

When a corporation liquidates,it performs three activities.What is the general order of these activities in a plan of liquidation?

Accepted Answer

A) pay debts,distribute property to shareholders,and wind up its affairs 
B) wind up its affairs,distribute property to shareholders,pay debts 
C) pay debts,wind up its affairs,and distribute property to shareholders 
D) wind up its affairs,pay debts,and distribute property to shareholders 
A) pay debts,distribute property to shareholders,and wind up its affairs 
B) wind up its affairs,distribute property to shareholders,pay debts 
C) pay debts,wind up its affairs,and distribute property to shareholders 
D) wind up its affairs,pay debts,and distribute property to shareholders D

Question 2

Ball Corporation owns 80% of Net Corporation's stock and Jack owns the remaining 20% of Net Corporation's stock.Ball's basis in the Net stock is $200,000 and Jack's basis in the Net stock is $100,000.Under a plan of complete liquidation,Ball Corporation receives property with an adjusted basis of $400,000 and an FMV of $800,000 and Jack receives property with an adjusted basis of $50,000 and an FMV of $200,000.Ball and Jack's bases in the property received are:

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)    B

Question 3

Cowboy Corporation owns 90% of the single class of stock in Doggie Corporation.The other 10% is owned by Miguel,an individual.Cowboy's basis in its Doggie Corporation stock is $100,000 and Miguel's basis is $50,000.Doggie Corporation distributes property having an adjusted basis of $150,000 and an FMV of $500,000 to Cowboy Corporation,and $60,000 of money to Miguel as a liquidating distribution.Doggie and Cowboy Corporations must recognize gain of:

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)    A

Question 4

What are the tax consequences of a cash-method shareholder,subsequent to a liquidation,if obligated to pay a contingent liability of the liquidated corporation?

Accepted Answer

No amendment is made to the prior year's

Question 5

Barbara owns 100 shares of Bond Corporation stock with a basis of $40,000.Barbara receives two liquidating distributions,including $16,000 paid last year and $20,000 paid in the current year.An additional distribution of an undetermined amount is expected next year.On last year's tax return,Barbara can recognize a loss of

Accepted Answer

A) $0. 
B) $1,000. 
C) $4,000. 
D) $14,000. 
A) $0. 
B) $1,000. 
C) $4,000. 
D) $14,000.

Question 6

Riverwalk Corporation is liquidated,with Juan receiving $5,000 in money,other property having a $6,000 FMV,and a $1,000 mortgage on the property.Juan's basis in his River walk stock is $8,000.Upon liquidation,Juan must recognize a gain of

Accepted Answer

A) 0) 
B) $2,000. 
C) $3,000. 
D) $11,000. 
A) 0) 
B) $2,000. 
C) $3,000. 
D) $11,000.

Question 7

Moya Corporation adopted a plan of liquidation last year.All but a nominal amount of Moya's assets are distributed to its shareholders within the year.Which of the following statements is not true?

Accepted Answer

A) The liquidation of Moya Corporation means the corporation has undergone dissolution. 
B) Moya Corporation retains its state charter. 
C) Moya Corporation's existence is preserved. 
D) Moya Corporation has been liquidated for tax purposes. 
A) The liquidation of Moya Corporation means the corporation has undergone dissolution. 
B) Moya Corporation retains its state charter. 
C) Moya Corporation's existence is preserved. 
D) Moya Corporation has been liquidated for tax purposes.

Question 8

Identify which of the following statements is true.

Accepted Answer

A) The Sec.332 nonrecognition rules apply to the parent corporation when a subsidiary corporation transfers property to the parent corporation in payment of the subsidiary's debt obligation. 
B) A subsidiary corporation is prevented from recognizing gain or loss when transferring property to its parent corporation in satisfaction of an indebtedness it owes to the parent corporation as part of its complete liquidation. 
C) Nonrecognition of gain or loss rules apply to a subsidiary corporation when,pursuant to its complete liquidation,the subsidiary transfers property to a third-party creditor. 
D) All of the above are false. 
A) The Sec.332 nonrecognition rules apply to the parent corporation when a subsidiary corporation transfers property to the parent corporation in payment of the subsidiary's debt obligation. 
B) A subsidiary corporation is prevented from recognizing gain or loss when transferring property to its parent corporation in satisfaction of an indebtedness it owes to the parent corporation as part of its complete liquidation. 
C) Nonrecognition of gain or loss rules apply to a subsidiary corporation when,pursuant to its complete liquidation,the subsidiary transfers property to a third-party creditor. 
D) All of the above are false.

Question 9

Explain the difference in tax treatment between a partial liquidation and a complete liquidation.

Accepted Answer

A complete liquidation is defined by Reg

Question 10

A liquidation must be reported to the Internal Revenue Service on Form 966

Accepted Answer

A) within 60 days of the adoption of a plan of liquidation. 
B) that is filed with the national IRS office. 
C) whether the shareholders' realized gain is recognized or not. 
D) by the shareholders. 
A) within 60 days of the adoption of a plan of liquidation. 
B) that is filed with the national IRS office. 
C) whether the shareholders' realized gain is recognized or not. 
D) by the shareholders.

Question 11

Lake City Corporation owns all the stock in Columbia Corporation.Pursuant to a plan of complete liquidation,Columbia distributes land having a $500,000 FMV and a $200,000 basis to Lake City.Columbia's gain with respect to the distribution will be

Accepted Answer

A) no gain recognized. 
B) $200,000. 
C) $300,000. 
D) $500,000. 
A) no gain recognized. 
B) $200,000. 
C) $300,000. 
D) $500,000.

Question 12

Dusty Corporation owns 90% of Palace Corporation's stock and Susan owns the remaining stock.Dusty Corporation's stock basis is $300,000 and Susan's stock basis is $20,000.Under a plan of complete liquidation,Dusty Corporation receives property with a $400,000 adjusted basis and a $540,000 FMV and Susan receives property with a $20,000 adjusted basis and a $60,000 FMV.The bases of the properties are:

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 13

Identify which of the following statements is false.

Accepted Answer

A) An individual taxpayer,who is assessed an additional payment of money based on stock ownership in a corporation whose stock is redeemed in a complete liquidation,may recognize a capital loss to the extent of the additional assessment. 
B) The open transaction doctrine defers the shareholder's gain or loss from a liquidation until the assets can be valued by sale or collection. 
C) The open transaction doctrine as applied to complete corporate liquidations refers to the numerous planning alternatives available when liquidating a corporation. 
D) The IRS asserts that the open transaction doctrine should be used only in extraordinary circumstances. 
A) An individual taxpayer,who is assessed an additional payment of money based on stock ownership in a corporation whose stock is redeemed in a complete liquidation,may recognize a capital loss to the extent of the additional assessment. 
B) The open transaction doctrine defers the shareholder's gain or loss from a liquidation until the assets can be valued by sale or collection. 
C) The open transaction doctrine as applied to complete corporate liquidations refers to the numerous planning alternatives available when liquidating a corporation. 
D) The IRS asserts that the open transaction doctrine should be used only in extraordinary circumstances.

Question 14

John and June,husband and wife,have owned Ruby Corporation for a number of years.Their basis in the Ruby stock,which they own jointly,is $200,000.The Ruby stock is Sec.1244 stock.Ruby Corporation liquidates,and John and June receive the following from the corporation: accounts receivable,$30,000 FMV;a car,$21,000 FMV;office furniture,$11,000 FMV;and $25,000 in cash.What is the amount and character of their gain or loss?

Accepted Answer

$30,000 + $21,000 + $11,000 + $25,000 =

Question 15

Identify which of the following statements is true.

Accepted Answer

A) In general,a noncorporate shareholder that receives a distribution in complete liquidation of the liquidating corporation recognizes his or her entire realized gain as a capital gain. 
B) The basis for nonmoney property received by a noncorporate shareholder as part of a liquidating distribution is the same as its basis on the books of the liquidating corporation. 
C) The liquidating corporation does not recognize gains and losses when making a distribution of nonmoney property. 
D) All of the above are false. 
A) In general,a noncorporate shareholder that receives a distribution in complete liquidation of the liquidating corporation recognizes his or her entire realized gain as a capital gain. 
B) The basis for nonmoney property received by a noncorporate shareholder as part of a liquidating distribution is the same as its basis on the books of the liquidating corporation. 
C) The liquidating corporation does not recognize gains and losses when making a distribution of nonmoney property. 
D) All of the above are false.

Question 16

Lake Corporation distributes a building used in its business to Sandy in exchange for all of her Lake stock.Sandy's basis in her stock is $30,000 and the property she receives has a $90,000 FMV.As part of the distribution,Sandy assumes a liability associated with the property of $65,000.The property's basis prior to the liquidating distribution was $25,000.What are the tax consequences of the distribution to Sandy? To Lake Corporation?

Accepted Answer

Sandy will recognize a $5,000 capital lo

Question 17

Greg,a cash method of accounting taxpayer,owns 100 shares of Parker Corporation stock with a basis of $20,000.Greg receives two liquidating distributions of $8,000 on March 3 of last year,and $8,000 on August 8 of this year.The amount of the second distribution is not known until June 15 of this year.Greg recognizes

Accepted Answer

A) a gain of $8,000 last year and a loss of $12,000 this year. 
B) a loss of $2,000 last year and a loss of $2,000 this year. 
C) no loss last year and a $4,000 loss this year. 
D) none of the above 
A) a gain of $8,000 last year and a loss of $12,000 this year. 
B) a loss of $2,000 last year and a loss of $2,000 this year. 
C) no loss last year and a $4,000 loss this year. 
D) none of the above

Question 18

Under what circumstances does a liquidating corporation not recognize a gain or loss when making a distribution?

Accepted Answer

A liquidating corpor

Question 19

Jack Corporation is owned 75% by Sherri and 25% by Mark.Sherri and Mark have $125,000 and $50,000 bases in their stock,respectively.Jack Corporation adopts a plan of liquidation on March 1.On April 12,Sherri receives the following property as a liquidating distribution: cash of $30,000;land,$125,000 FMV;and 150 shares of Green Corporation stock,$30,000 FMV.The land is subject to a $20,000 mortgage.On the same date,Mark receives $10,000 FMV of Green stock (50 shares)and cash of $45,000 as a liquidating distribution.The land has a basis of $50,000 and the stock has a basis of $70,000 in Jack Corporation's hands.Both are capital assets to Jack Corporation and have been held for a number of years.
a)What is the amount and character of Jack Corporation's recognized gain or loss on the liquidating distributions?
b)What are the amounts and characters of Sherri and Mark's recognized gains or losses?
c)What are the bases of the land and stock to Sherri and Mark?

Accepted Answer

a)Land: ($105,000 net FMV + $20,000 liab

Question 20

Key Corporation distributes a patent with an indeterminable value to Gary as part of a plan of complete liquidation.In addition,Gary receives $40,000 cash and land with a $70,000 FMV and a $30,000 adjusted basis.Gary's basis in the Key stock (a capital asset)surrendered is $120,000.If Gary relies on the open transaction doctrine,at the liquidation date he must recognize a

Accepted Answer

A) $0 gain. 
B) $10,000 capital loss. 
C) $30,000 capital loss. 
D) $70,000 capital gain. 
A) $0 gain. 
B) $10,000 capital loss. 
C) $30,000 capital loss. 
D) $70,000 capital gain.

When a corporation liquidates,it performs three activities.What is the general order of these activities in a plan of liquidation?

What are the tax consequences of a cash-method shareholder,subsequent to a liquidation,if obligated to pay a contingent liability of the liquidated corporation?

Riverwalk Corporation is liquidated,with Juan receiving $5,000 in money,other property having a $6,000 FMV,and a $1,000 mortgage on the property.Juan's basis in his River walk stock is $8,000.Upon liquidation,Juan must recognize a gain of

Moya Corporation adopted a plan of liquidation last year.All but a nominal amount of Moya's assets are distributed to its shareholders within the year.Which of the following statements is not true?

Identify which of the following statements is true.

Explain the difference in tax treatment between a partial liquidation and a complete liquidation.

A liquidation must be reported to the Internal Revenue Service on Form 966

Lake City Corporation owns all the stock in Columbia Corporation.Pursuant to a plan of complete liquidation,Columbia distributes land having a $500,000 FMV and a $200,000 basis to Lake City.Columbia's gain with respect to the distribution will be

Identify which of the following statements is false.

Identify which of the following statements is true.

Under what circumstances does a liquidating corporation not recognize a gain or loss when making a distribution?

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

US Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

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Exam 6: Corporate Liquidating Distributions

When a corporation liquidates,it performs three activities.What is the general order of these activities in a plan of liquidation?

What are the tax consequences of a cash-method shareholder,subsequent to a liquidation,if obligated to pay a contingent liability of the liquidated corporation?

Riverwalk Corporation is liquidated,with Juan receiving $5,000 in money,other property having a $6,000 FMV,and a $1,000 mortgage on the property.Juan's basis in his River walk stock is $8,000.Upon liquidation,Juan must recognize a gain of

Moya Corporation adopted a plan of liquidation last year.All but a nominal amount of Moya's assets are distributed to its shareholders within the year.Which of the following statements is not true?

Identify which of the following statements is true.

Explain the difference in tax treatment between a partial liquidation and a complete liquidation.

A liquidation must be reported to the Internal Revenue Service on Form 966

Lake City Corporation owns all the stock in Columbia Corporation.Pursuant to a plan of complete liquidation,Columbia distributes land having a $500,000 FMV and a $200,000 basis to Lake City.Columbia's gain with respect to the distribution will be

Identify which of the following statements is false.

Identify which of the following statements is true.

Under what circumstances does a liquidating corporation not recognize a gain or loss when making a distribution?

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

US Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

Us Taxation of Foreign-Related Transactions

Filters